Key Learning Points: Lesson 4
- Only licensed Brokers can trade on the Exchange.
- Trades have to be conducted with Clearing Brokers.
- Marketing and Trading companies provide hedging services for clients.
- There are two classes of market participants, “commercial,” or those interested in the physical commodity, and “non-commercial,” or “speculators.”
- Most trading is purely for financial gain as only a small amount of contracts are fulfilled in the physical (cash) markets.
- “Day Traders” and speculators rely on Technical Charts to predict market price changes.
- Electronic trading platforms exist that bypass the "pits" and can be traded after hours.
Now that we have studied the NYMEX, financial derivative contracts, and the order execution, we will learn how prices are determine and reported in the cash market place. Later, we will explore the methods used by producers and end-users to reduce their price and supply risk, otherwise known as "hedging."
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